Options Report: Trading Volume, Dendreon, Baidu

By Jim Kingsland
Tuesday, 3 Jul 2007 | 1:14 PM ET

Business has continued to boom at the Chicago Board Options Exchange. The exchange said after the market closed Monday that average daily volume during the month of June was up 24% to 3.5 million contracts, compared with 2.9 million contracts during June 2006. Average daily volume jumped 20% during the second quarter.

"Institutional investors realize options are an efficient and effective means of managing risk and enhancing returns," said Bud Haslett, director of option analytics at Miller Tabak. "There’s a little bit more of a need to manage downside risk after the gains in the market, since most of the positions are long stock."

Haslett said that option premiums have increased as more hedging has taken place amid market uncertainty, as reflected in Volatility Index gains.

"If you have big intraday swings, volatility will tick up," Haslett said. "The VIX was at single digits last summer and closed above 16 last week, indicating there's more uncertainty in the marketplace. Options sellers are less likely to sell at lower volatility."


Dendreon call options were among the most actively traded options ahead of the Independence Day break. CNBC pharmaceuticals reporter Mike Huckman reported that scientists at the National Cancer Institute found evidence that therapeutic cancer vaccines, including Dendreon's Provenge, were "prolonging patient survival."

Their findings are being published in the new issue of the Journal of the American Association of Cancer Research.

Dendreon's Provenge received a positive recommendation for approval by an outside panel of experts, but the FDA delayed making a decision until more data comes in.

The NCI researchers said the prostate cancer vaccines were "in fact priming the immune system" and that the scientific community and regulatory committees "ought to rethink...our current approach to measuring the effectiveness of a cancer vaccine."

Volume in the Dendreon July 7.5 and July 10 calls surged past 20,000 contracts by late morning on bets the stock will further rally before expiration of those options in a little more than two weeks. The shares closed at $7.70 on Tuesday.


Volume in options of Chinese language Internet search company Baidu.com continued to be biased toward call options as momentum players bet the stock will rise further. Baidu shares, which closed at $181 Tuesday, have rallied from $154 less than two weeks ago. In the July options, call volume swamped put volume by a margin of more than 2 to 1, with the heaviest activity in the July 200 calls. That's a bet that Baidu shares will rise another $20 before expiration on July 20.

The rise in Baidu and a host of other Chinese internet stocks was sparked Monday after Chinese gaming company Shanda said it struck a deal with Tokyo-based Tecmo, through which it will run the first online version of Tecmo's 3-D video fighting game "Dead or Alive." The online version, to be called "DOA Online," is expected to boost traffic at Chinese internet sites.

  Price   Change %Change


Contact U.S. News


    Get the best of CNBC in your inbox

    › Learn More

Don't Miss

U.S. Video

  • Bitcoin. Digital gold rush or a shadowy tool empowering criminals on the dark web? What is really driving The Bitcoin Uprising? CNBC's Mary Thompson takes an in-depth look at this emerging digital currency by speaking to the bitcoin faithful, who believe the open source currency will upend the global financial system, as well as those who believe bitcoin is an easily manipulated tool that empowers criminals, hackers and drug barons in the dark online underworld. Although the future of bitcoin is uncertain, The Bitcoin Uprising sheds much needed light on the speculative currency and the future of money.

  • Loyalists around the world have embraced it as the cryptocurrency of the future, but some big names on the street differ widely in their beliefs about bitcoin. The Oracle of Omaha thinks it's a "joke." Tech entrepreneur Marc Andreessen counters that Buffett is out of touch, while bitcoin believers like Jonathan Rumion fully embrace the digital currency by buying groceries with bitcoin and even getting paid in bitcoin. CNBC's Mary Thompson reports.

  • Authorities say the online black-market bazaar Silk Road could be the tip of the iceberg when it comes to the criminal underworld using bitcoin for trading in illicit goods and services. On the "Dark Web," fake IDs, drugs, even hit men are all paid in bitcoin. CNBC's Mary Thompson explores why bitcoin is the currency of choice for criminal activity on the dark web and reports on the story of Mt. Gox, the largest bitcoin exchange, which shut down in February, leaving bitcoin investors holding the bag.